Large Employers Holding the Line on Premium Increases

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For employers that offer health coverage to their employees, the Affordable Care Act (ACA) has introduced sweeping changes that impact everything from medical plan design and eligibility determination to employee communications, compliance reporting and tax filings. But large U.S. employers have been fairly effective in managing overall health care costs despite concerns over ACA mandates, according to the
2015 ADP Annual Health Benefits Report from the ADP Research Institute, an affiliate of benefits and payroll services provider ADP.

The study, released in April 2015, highlights health benefits trends over time. The researchers collected data from nearly 200 U.S.-based organizations which together employ approximately 500,000 employees each year. All organizations used in the study had 1,000 or more employees for at least one of the five years, and no fewer than 800 in any given year.

“While many large employers have been struggling with ACA compliance and administrative requirements, employee participation and premium contribution rates appear to be fairly stable,” the report found. Despite any difficulties adhering to the new standards, “five years in, this study reveals the underlying cost trend for large employers remains modest.”

Premiums Rising at a Slower Rate

Among the findings on premium increases:

• Since 2011, total premiums (including both employer and employee portions) increased for large employers by 9.4 percent, or about 2 percent every year.

• From 2014 to 2015, total premiums increased 2.6 percent, which is relatively modest when compared to the previous decade.

“This could be partially due to more employers offering high-deductible plans with higher co-pays and implementing flexible spending accounts and consumer-directed health plans,” according to ADP’s researchers.

Other research indicates that small employers were likely to have faced larger premium increases than the biggest employers over this period.

Eligibility Rates Increasing; Participation Rates Steady

Eligibility rates increased from 2013 as the economy improved, the labor market became more competitive and employers began to offer coverage to more workers to ensure compliance with the ACA employer coverage (“shared responsibility”) mandate, noted the report.

Although eligibility has increased, the percentage of eligible employees electing coverage decreased, “possibly indicating that many employees have alternate forms of coverage,” the researchers said. “Due to the rise in eligibility and lower election rates, overall participation rates remained relatively unchanged.”

While eligibility rose for the under-26 age group, the percentage of eligible employees in that group who elected insurance through their employers decreased considerably, resulting in lower participation rates over time. “This trend may be a reflection of the ACA's extended dependent coverage provision allowing those under 26 to remain on their parents' plans,” said the report. “Lower incomes and coverage from school or the ACA’s [public exchange] plans may also have contributed to the lower election rates for this group.”

Premiums by Industry

Average monthly premiums were shown to have increased in five selected industries at varying rates:

• Industries with higher medical premiums, such as professional business services, with total monthly premiums of $911 in 2015, experienced the lowest premium increases at 5.8 percent over a four-year period.

• Education and health services had the lowest monthly premium in 2015, at $792, but incurred premium increases of over 10 percent during the same time period.

• The largest jump occurred in the trade, transportation and utilities industry, which had an 11.4 percent increase in premiums.

“Because the ACA imposes an upper boundary on premium costs through an excise tax starting in 2018, as well as lower boundaries for affordability and minimum essential coverage, variance in medical costs across industry groups may shrink over time,” the researchers predicted.

Premiums by Age Group

Over a four-year period, health plan premiums rose for all age groups but to different degrees:

• The greatest increase was for the under-26 age group. However, this group had the lowest monthly premium overall, which was $552 in 2015.

• The highest monthly premium was in the 40-49 age group at $991, followed by the 50-59 age group at $936.

“Those ages, 40 to 59, are likely to have the most dependents (including adult children staying on a parent's policy until age 26), which could explain their higher monthly premiums,” the report noted.

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.